Monsanto, Pioneer locked in fight over biotech seeds

ST. LOUIS -- Winter months are quiet on the farm, but it's crunch time for seed companies Monsanto Co. and Pioneer Hi-Bred International Inc.

While farmers place their orders for next year's crop, the companies are fighting for market share in the multibillion-dollar market for genetically engineered seeds.

Pioneer is developing new strains of biotech seeds, while Monsanto has been aggressively buying up small seed-dealing companies to get better access to farmers.

The result seems to be a tight competition this year, with Monsanto possessing an edge, according to a recent report from analyst Kevin McCarthy with Bank of America in New York.

Monsanto has vastly improved its network of seed dealers and taken market share away from Pioneer in the crucial market for U.S. corn seed, McCarthy said.

"We think Monsanto will continue to gain market share in the U.S. corn market, as it has done for at least five years running," McCarthy said.

But Pioneer "poses a long-term threat to Monsanto because it is seeking to develop independent technology," he said.

Spokespeople for Monsanto and Pioneer pointed out the overall share of cropland being planted with biotech seed is rising, so both companies stand to profit. The total acres planted with biotech corn jumped from 42.5 million acres in 2005 to 48.4 million this year, according to the Biotechnology Industry Organization.

"Corn acres are going up, and that's really good for people in the seed business," said Pioneer spokesman Doyle Karr. "There are going to be lots of winners in 2006."

For years, Pioneer and Monsanto had a symbiotic relationship when it came to selling biotech seeds.

In the 1980s, Monsanto first developed genetically modified organisms -- or GMOs -- and sold them through old-school crop companies like Pioneer. Monsanto charged Pioneer a licensing fee to sell the crops and gained access to Pioneer's broad-based sales network.

But Des Moines, Iowa-based Pioneer changed the arrangement in 2003, when it released a strain of genetically engineered corn it made on its own. President Dean Oestreich said the company could make higher profits by selling its own biotech seeds and narrowing Monsanto's access to Pioneer's broad sales force.

Monsanto has been doling out cash over the last few years to blunt Pioneer's challenge. In 2004, Monsanto formed a holding company called American Seeds Inc. with the goal of buying up regional seed dealers.

Last week, ASI announced the purchase of Landec Corp.'s direct seed marketing and sales company for $50 million. The purchase includes a customer call center and two seed brands, Fielder's Choice Direct and Heartland Hybrids.

The purchase brought Monsanto neck and neck with Pioneer for the first time in the corn seed business, McCarthy said.

Just five years ago, Pioneer controlled about 40 percent of the market share in corn while Monsanto had about 10 percent with its Dekalb and Asgrow brands, McCarthy said.

After the Landec acquisition, Monsanto pulled to 29 percent of market share while Pioneer slipped to 30 percent, McCarthy said. Monsanto could match or surpass Pioneer's clout within a year or so, he said.

One of Pioneer's biggest challenges to Monsanto over the next three years will come in the form of new soybeans that are engineered to resist herbicides, McCarthy said.

Monsanto plans to release its own brand of "Roundup Ready" pesticide-resistant corn and soybean seeds by 2009. Monsanto's first crops were engineered for the same trait.

Monsanto spokeswoman Lori Fisher said the company is gaining sales by selling "triple stack" seeds that have more than one genetically engineered trait -- such as herbicide and pest resistance.

Fisher said the overall market will increase, helping both companies.

"We believe there is plenty of room for alternative trait technologies in the market," she said in an e-mail.